Can Microsoft Stock Rally on Dynamics 365 Business Applications?

Microsoft's MSFT Dynamics 365 business applications suite is emerging as a quiet but consistent growth driver, posting a 19% revenue increase (17% in constant currency) in the second quarter of fiscal 2026 ended Dec. 31, 2025. The performance reflected continued expansion across all workloads, contributing to the broader Productivity and Business Processes segment that generated $34.1 billion in revenues and a 60% operating margin — the highest among Microsoft's three reporting segments.

The Dynamics 365 trajectory draws attention not just for its current pace but for what is being layered into the platform. Microsoft has been systematically embedding AI agents across its business application suite throughout the 2025 release wave 2, which runs through March 2026. The Payables Agent in Business Central automates vendor invoice processing, while the newly introduced Expense Management Agent handles categorization, reconciliation and approval routing. On the commercial front, the Sales Development Agent, available via the Frontier Program, autonomously builds a pipeline and nurtures leads within Dynamics 365 Sales. These agents are designed to shift ERP and CRM functions from reactive systems to proactive execution platforms.

Microsoft also unveiled the Dynamics 365 Commerce MCP Server at NRF in January 2026, expected in preview in February 2026. Built on the Model Context Protocol, the server exposes core retail logic — including pricing, inventory and fulfillment — enabling AI agents to execute retail workflows across digital and physical channels.

For the third quarter of fiscal 2026, Microsoft guided Dynamics 365 revenue growth in the high teens, signaling no deceleration. That consistency, combined with the deepening AI integration and growing enterprise adoption across verticals, provides a credible foundation for investors to watch the business applications segment as a meaningful contributor to Microsoft's overall revenue momentum.

Oracle and Salesforce: How Do Rivals Stack Up?

Oracle ORCL and Salesforce CRM represent Microsoft's closest competition in the enterprise business applications arena. Oracle's Fusion Cloud ERP reported 17% revenue growth in its most recent quarter, with Oracle leaning heavily on AI-embedded workflows across finance and supply chain. Salesforce reported a 9% year-over-year revenue increase, anchored by its Agentforce platform, which deploys autonomous AI agents across sales, service and commerce functions. While Salesforce is building its agentic narrative around a standalone CRM ecosystem, Oracle's integrated cloud suite competes more directly with Dynamics 365's ERP breadth. Both Oracle and Salesforce trail Dynamics 365's 19% fiscal second-quarter growth rate.

MSFT’s Share Price Performance, Valuation & Estimates

MSFT shares have lost 21.2% in the past six-month period, outperforming the Zacks Computer – Software industry's decline of  24.3% but underperforming the Zacks Computer and Technology sector's return of 8.5%.

MSFT’s 6-Month Price Performance

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From a valuation standpoint, MSFT stock is currently trading at a forward 12-month Price/Sales ratio of 8.33X compared with the industry’s 7.01X. MSFT has a Value Score of D.

MSFT’s Valuation

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The Zacks Consensus Estimate for MSFT’s fiscal 2026 earnings is pegged at $16.97 per share. The estimate indicates 24.41% year-over-year growth.

Microsoft Corporation Price and Consensus

Microsoft Corporation price-consensus-chart | Microsoft Corporation Quote

Microsoft currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

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